Casino gambling deepens inequality, study finds

State-sponsored casino gambling is a growing scourge masquerading as a harmless source of entertainment and government revenue, argues a new report by a group of scholars and community leaders.

The report entitled "Why Casino's Matter" was spearheaded by the Institute for American Values in New York City and vetted and endorsed by 33 scholars and civic leaders from across the political spectrum.

The study grew out of an earlier report that addressed predatory lending institutions, said Barbara Dafoe Whitehead, the researcher at the Institute for American values who spearheaded the report.

Among its key contentions is that casino gambling preys on poor communities and exacerbates inequality. The authors focus on the rapid expansion of casino gambling, which until recently was legal only in Nevada and Atlantic City, New Jersey.

Casinos, the study notes, are “popping up across the nation, near a shopping mall or a river dock near you, with the full support and sponsorship of the very state governments that only yesterday had outlawed them.”

The rapid growth of state-sponsored gambling, the authors argue, is “affecting our health, our economics, our politics, our ideas and social values, and perhaps even who we are as a people and what obligations we have toward one another.”

The gaming industry sees little new or convincing in the “Why Casinos Matter” report.

"Basically they have just taken out of mothballs a lot of long-discredited arguments against casinos that have been made by gambling opponents for decades," said Judy Patterson, executive director of the American Gaming Association. "Many of the researchers cited in the report have a tendency to cite each other's research in a very circular fashion.”

A commission unheeded

"This all began with the National Gambling Impact Commission," Patterson said, referring to a 1999 report commissioned by Congress to investigate the impact of a massive expansion of legalized gambling. Congress commissioned the study in 1996 — not coincidentally, the same year the industry established the National Center for Responsible Gaming.

The commission was spurred by concerns that a social shift had occurred with little attention to its possible impacts. The commission noted that in 1975 just 10 percent of Americans reported playing at a casino, jumping to 24 percent by 1998. Twenty-four percent bought a lottery ticket in 1975. In 1998, 52 percent did.

The commission recommended the rapid expansion of gaming be curtailed, urging that the National Institutes of Health, the Justice Department, the Department of Labor, and the Substance Abuse and Mental Health Services Administration all be asked to open relevant lines of data and research centered on gambling.

The 1999 Commission held that too little research had been done on critical questions, including the impact of gambling on local communities, economics, savings and investment, and possible sociological impact of pathological gambling on families and communities.

"There are surprisingly few independent studies that have addressed issues such as these," the 1999 report stated, "And as for the impact on the national economy, efforts to estimate the net impact of gambling on national statistics such as investment, savings, economic growth, and so forth, break down in the face of our limited knowledge."

Industry responds

Beginning in 1996, the gaming industry decided to get out in front of gaming addiction issues, founding the National Center for Responsible Gaming. The industry has funneled more that $22 million into research, using careful firewall protocols modeled on the National Institutes of Health model, with an independent science advisory board. The NCRG does not play any role in deciding which research projects to fund, and never sees them until after they are published.

In contrast to tobacco executives, who as recently as 1994 infamously testified before Congress that tobacco was not addictive, AGA president Frank Fahrenkopf has openly asserted that gambling is addictive and can "affect brain chemistry in ways that are similar to substance abuse," as he put it in a 2009 address.

But the gaming industry argues that only one percent of the adult population has been found to be vulnerable to damaging behavior. Industry research has focused efforts on identifying and containing those problem gamblers.

Whitehead acknowledges the gaming industry-supported research has been of high quality and that the firewalls have been adequate. But she argues that the resulting research has focused narrowly on individual pathological gambling, sidestepping some critical questions.

"The danger is greater than one percent, and it is increasing as casinos become more accessible," Whitehead said.

An 80/20 problem

A key contention in the “Why Casinos Matter” report is that 40 to 60 percent of casino revenue comes from problem, i.e. addicted, gamblers.

It's a classic 80/20 problem, with 80 percent of the payoff being driven by 20 percent of the clientele, critics of the industry argue. In an appendix, the report points to 11 different sources for this data, including peer-reviewed studies and government reports from Canada and Australia.

The one percent problem gambler figure is an adult population estimate, Patterson said. She said she is not aware of any data on the percentage of casino customers who fit that profile, nor the percentage of revenue that is driven by problem gamblers.

Unanswered questions

Fifteen years later, the commission’s report had little impact, and little has changed on the research front, with the exception that industry-funded research through NCRG has produced substantial information about the psychology and treatment of individual gaming addiction.

The larger sociological and economic questions remain largely unasked and unanswered, Whitehead said. That may explain why the new report by the Council of Casinos offers more questions than answers, and sometimes slips into generalization rather than offering data and footnotes.

To Judy Patterson and the gaming industry, this lack of hard data coming from critics is a symptom of weakness in their arguments.

And yet, Patterson likewise had no data to offer on one key question pressed by Whitehead, namely, the ratio of casino revenue that comes from problem gamblers. That data would be difficult to collect, Patterson protested, because it would involve intrusive customer surveys.